Primary heats up as first full week of May nears; $3.38 billion to launch by Wednesday

By Sara Rosenberg

New York, May 1 - New issuance is picking up as the bank loan market enters a new month with deals like Interline Brands Inc., Hayes Lemmerz International Inc., Owens-Illinois Inc. and Rent-A-Center Inc. all scheduled to launch in the first three days of next week. In fact, between these four deals alone, the primary market will see approximately $3.38 billion in new bank debt for investors to choose from.

There is some market skepticism floating around in regards to pricing on Interline Brands' $205 million credit facility (B+), which is scheduled to launch at a 10.30 a.m. ET bank meeting on Monday.

The Jacksonville, Fla. building materials distributor's loan is being compared by some to the recently completed Century Maintenance Supply credit facility since the companies operate in the "exact same business", according to a fund manager.

Interline Brands' deal consists of a $65 million five-year revolver and a $140 million 61/2-year term loan B with an interest rate of Libor plus 450 basis points.

Century Maintenance Supply's loan consists of a $25 million five-year revolver with an interest rate of Libor plus 350 basis points and a $105 million seven-year term loan B with an interest rate of Libor plus 450 basis points.

However, Moody's Investors Service rated the Century Maintenance Supply deal B1 and the Interline Brands' deal is rated B2, the fund manager continued.

"Century Maintenance was B1 and that priced at 450 and syndicated at 991/2. I view this as under priced. My guess is that you are going to see the spread increase by at 25 basis points before this gets done," the fund manager said.

When Century Maintenance launched, potential investors were favorably impressed for a few reasons including pricing levels and company performance. "The pricing is appealing. It's been a performing credit for 4½ years now. Out of the box there's three times in senior debt. The company generates approximately $35 million EBITDA on approximately $310 million of sales. I'm favorably impressed," a buy side source previously told Prospect News.

JPMorgan and Credit Suisse First Boston are the lead banks on the Interline deal, with Wachovia and Fleet participating as well. Proceeds, combined with proceeds from a $200 million bond offering, are being used to refinance existing bank debt and mezzanine debt. The company has two times senior debt and 4.6 times total debt, according to the fund manager.

Citibank was the lead bank on the Century Maintenance deal, which was also used to refinance existing debt.

As for the impetus behind Interline's decision to refinance at this moment, "The bond market is very strong and we have 16% mezzanine debt," a company spokesman explained, adding that the new credit facility is being brought to market as well since "we figured we'd refinance everything in one shot."

Hayes Lemmerz is scheduled to launch its $575 million exit financing credit facility on Monday, according to a syndicate source. Citibank and Lehman Brothers are the lead banks on the deal.

The loan consists of a $450 million six-year term loan B and a $125 million five-year revolver. Price talk on the tranches is not out yet, according to the source.

The Northville, Mich. auto parts maker and its subsidiaries located in the United States and one subsidiary in Mexico filed voluntary petitions for reorganization under Chapter 11 on Dec. 5, 2001.

Owens-Illinois is scheduled to launch a new credit facility approximately sized at $2 billion on Wednesday, according to a syndicate source. Deutsche Bank and Bank of America are the lead banks on the deal.

The loan is expected to contain about $1.3 billion to $1.4 billion of pro rata comprised of a term loan A and a revolver with price talk of Libor plus 325 basis points. In addition, there will be a term loan B that is expected to be sized anywhere from $600 million to $700 million with price talk of Libor plus 350 to 375 basis points, the source said.

Proceeds will be used to refinance the company's existing debt.

Owens-Illinois is a Toledo, Ohio manufacturer of packaging products.

Rent-A-Center Inc. is scheduled to hold a bank meeting for a new $600 million credit facility on Tuesday. Lehman Brothers and JPMorgan are the lead banks on the deal.

The loan will consist of a $400 million term loan B, a $120 million revolver and an $80 million synthetic term loan.

Proceeds will be used to refinance the company's existing senior debt.

Late Thursday, Rent-A-Center announced a reduction in the size of the deal from $650 million previously announced by taking $50 million off the term loan.

In a statement it said the change was a result of the $50 million increase in the size of its bond offering, priced earlier in the day.

Rent-A-Center is a Plano, Tex. operator of company-owned stores in the rent-to-own industry.

In the secondary, Huntsman Corp.'s bank debt was once again reported as trading actively in the secondary market at around 95, 951/2, according to a trader.

On Wednesday, one trader had already seen trades happening at these levels, while a second trader saw the Salt Lake City chemical company's loan trading at 94.

The loan has been performing well all week since Monday's release of better-than-expected financial results for the first quarter. Huntsman Corp.'s bank debt immediately announcement on Monday, moving up a couple of points to around 93 from the high 80s to 90 area.

Wyndham International Inc.'s term loan B traded on Thursday at 76, according to a few traders. However, just how much of a change in levels and the impetus behind the activity was not agreed on by all.

One trader said that the Dallas hotel enterprise's loan was up two points on the day and cited news of a $425 million floating-rate financing package with Lehman Brothers as most probably the force behind the improvement.

"They talked about refinancing their commercial mortgages for a while so that's not new news," a second trader said in disagreement. "I don't think it's up on that rather just because everything else is moving up."

According to the second trader, the term loan B was quoted around 75 bid, 76 offered on Wednesday, so "it traded on the offered side today".

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.